Make Sure All That Infrastructure Spending Is Well Supported

President-elect Barack Obama has promised billions in infrastructure spending as part of a public works program bigger than any since the interstate highway system was built in the 1950s. Though it was greeted with hosannas, his proposal is only tapping into a clamor for such spending that's been rising ever since Hurricane Katrina hit New Orleans in 2005 and a major bridge collapsed in Minneapolis last year. With the economy now officially in recession, the rage for new brick and mortar is reaching a fever pitch.

But before we commit hundreds of billions to new construction projects, we should focus on just what kind of infrastructure investment we should – and shouldn't – be making. More important, we should think beyond temporary stimulus and make-work jobs and about investments that will propel the economy well into this century.

After all, it's not that we stopped spending on infrastructure over the past decade. It's that mostly, we haven't spent on the right things.

New York City, for example, has wasted billions on its bloated bureaucracy and on constructing new sports stadiums and other ephemera deemed necessary to maintain Mayor Michael Bloomberg's "luxury city." Meanwhile, many of its subway and rail lines have deteriorated. Over the decades, brownouts and blackouts, caused in part by underinvestment in energy infrastructure, have become common during periods of high energy use in the summer.

Similarly, California Gov. Arnold Schwarzenegger has extolled the Golden State as "the cutting-edge state . . . a model not just for 21st-century American society but the world." Yet California's once envied water-delivery systems, roadways, airports and schools are in serious disrepair. Many even more hard-pressed communities – Cleveland, Pittsburgh, Philadelphia, Baltimore and New Orleans – have similarly wasted limited treasure on spectacular new convention centers, sports arenas, arts and entertainment facilities and hotels while allowing schools, roads, ports and other critical sinews of economic life to fray.

Convention centers and other tourist attractions create reasonably high-paying construction jobs in the short term, but over time, they create an economy dominated by lower-wage service jobs. Take New Orleans. It was once one of the nation's great industrial and commercial centers. But then the city turned its back for decades on its diverse economic base and invested not in levees, port development and basic infrastructure but in the arts, culture and tourism. The tourism and convention business surged, but the result was a low-wage economy. Nearly 40 percent of New Orleans households, or twice the national average, earned less than $20,000 a year in 2000.

Other places have followed a similar trajectory of folly, heavily subsidizing luxury condominiums, restaurants and other amenities to help lure the so-called creative class. Michigan Gov. Jennifer Granholm's 2003 plan to turn her state around focused on creating "cool cities" aimed at attracting hip, educated workers to Detroit and other failing urban centers. Instead of sparking an economic revival, Granholm has presided over a mass exodus of younger workers who can't find jobs in her state.

Perhaps no place epitomizes misplaced priorities better than Pittsburgh. Widely hailed in the media as a poster child for the urban "renaissance," Pittsburgh has suffered a precipitous decline in population: Its 310,000 residents are less than half its 1950 peak. It now shares with parts of the former East Germany the gloomy demographic of having more residents die each year than are born.

Like other cities, Pittsburgh has sought to revive itself with billions in new stadiums, arenas and cultural facilities. Meanwhile, its roads and bridges are in a constant state of disrepair. Most recently, the city embarked on a scheme to create a 1.2-mile, $435 million transit tunnel under the Allegheny River to connect downtown's heavily subsidized towers with taxpayer-funded pro sports stadiums and a new casino. This "tunnel to nowhere," derided by a local columnist as the nation's "premier transit boondoggle," will no doubt be the sort of thing many states and localities will seek federal infrastructure funds for, justifying them on the basis of both short-term economic stimulus and some kind of "green" agenda.

Although some new spending on efforts such as developing alternative fuels could improve efficiencies, many "green" projects seem destined to devolve into little more than expensive boondoggles. A recent program passed by the Los Angeles City Council, for example, calls on the city-owned utility's ratepayers to subsidize installing solar panels on office buildings. This plan, heavily promoted by labor lobbyists, mandates that the project be carried out by the Department of Water and Power, whose employees are among the most well-paid public workers in the nation. By some estimates, it would raise the price of electricity by as much as 8 percent. But it will do nothing to slow the continued flight of industrial and other employment from Los Angeles or its suburbs.

A "red-green" tilt to infrastructure programs – essentially marrying the labor and environmental lobbies – also seems sure to raise spending on public mass-transit projects. Some transit or rail spending can, of course, promote efficiency and productivity. A significant incentive to increase rail freight, for example, could boost productivity in the critical manufacturing, agriculture and energy industries because rail can generally carry far more goods on less fuel than long-haul trucking.

Spending on upkeep of transit systems in older centralized cities such as New York, Washington and Chicago also seems logical. But with few exceptions – the heavily traveled corridor between downtown Houston and the Texas Medical Center, for instance – ridership on most new rail systems outside the traditional cities has remained paltry, accounting for barely 1 or 2 percent of all commuters. Such projects are almost absurdly expensive on a per-capita basis; the Allegheny Institute, a Pennsylvania think tank that pursues free-market solutions to local questions, estimates that the cost to the taxpayer of each trip through the new Pittsburgh tunnel could be as much as $15.

Infrastructure investment requires a strong litmus test. Where the cash goes should be determined chiefly on the basis of how the spending will enhance the nation's productive capacity and raise incomes across the board. This also means looking beyond traditional brick and mortar investments to critical skills shortages. Businesspeople nationwide complain repeatedly of a chronic shortage of skilled blue-collar workers and technicians. More than 80 percent of 800 U.S. manufacturing firms surveyed in 2005 reported "a shortage of qualified workers overall." Nine in 10 firms said that they faced a "moderate-to-severe shortfall" in qualified technicians.

In sharp contrast to sports stadiums and convention centers, programs in skills training for U.S.-based industries such as aerospace, energy, machine tools and agricultural equipment tend to create high-wage jobs, which have expanded over the past decade even as the overall number of industrial positions has declined. Many industrial companies are increasingly desperate for skilled workers and often consider locating wherever they can be found. These companies also produce many jobs that, though not located on the factory floor, are critical to the nation's competitive edge. For example, the Manufacturing Institute estimates that manufacturers employ one-fourth of all scientists and 40 percent of engineers.

A forward-looking infrastructure program would also target places that would most benefit from new roads, bridges, ports and other critical facilities, including underperforming regions such as the Great Plains, Appalachia and rural Pennsylvania, as well as the depressed Great Lakes area. These areas offer cheaper labor and housing, prime locations and access to natural resources. Making them more accessible to markets and more energy efficient could replicate the great New Deal success in modernizing much of the South and West.

Perhaps most critical, we need to look at how to combine new physical investments with new initiatives in skills training, incubating small companies and promoting better ties with local universities and research facilities. This "infrasystems" approach has been implemented successfully in places as diverse as North Dakota's Red River Valley, the area around Wenatchee, Wash., and in various Southern locales such as Charleston and Savannah.

The call for more spending on infrastructure represents a unique opportunity to rebuild our productive economy and create long-term middle-class jobs. But if the effects are going to last, the trick is to concentrate on the basics and forget the flashy, feel-good kinds of projects that have characterized many "infrastructure" investments in recent years.

This article originally appeared at Washington Post.

Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.

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A few years ago I was listening to NPR as they interviewed some oil producer about what it would take to ramp up domestic production. The guy said that he would likely have to look for foreign workers because "I have gotten applications from people who have been convicted of DWI or Possession of Marijuana."

He's not saying that these workers are unskilled, simply that these crimes have some relationship to a person's fitness to work on an oil rig.

I am a criminal defense attorney and am constantly hearing from my former clients that they can't find a job or rent an apartment. Recently a former client of mine, who is an educated and self-confessed "computer nerd" had an interview with Best Buy and when they found out he had been busted with a joint as a teenager, they turned him down. They had been enthusiastic until then.

I hear these stories often enough to doubt the sincerity of businesspeople when they claim a shortage of skilled workers. Criminal law these days is about 60% personal behavior management (drugs and alcohol mostly) and 40% actual crime. And most of the actual crimes (e.g. family assault, criminal mischief, reckless driving, evading arrest etc.) would have absolutely no effect on a person's ability to perform work.

I just wanted to point this out to you and hope you include it in your thinking. From my perspective, it is a tragedy and a great drag on our productivity.
Dave

There are some very valid points that you’ve made, though initially I thought it was a bit presumptuous to link unemployed workers with criminal histories related to drugs. However, I do agree that a number of individuals that I have worked with in the past would fall into the net you describe. For some of my former coworkers these issues would rightly affect their employability, but for others it would be a poor characterization of their broader choices in life.

As a foreman leading a construction crew I could almost predict the reliability of a young carpenter by one metric. The metric was whether or not they were responsible for a rent payment. If they had a rent payment they were almost always more likely to make it to work on a consistent basis. Maybe the best way to express my point is in the necessity to separate technical skills from soft skills. I am sure the ranks of unemployed blue collar workers are well versed in technical skills, perhaps less so in soft skills. I would certainly include myself in this category looking 5-10 years in the past. You’ve articulated an important problem in hiring, what do you think might be a solution?
John

First off, it's the government which creates this problem by criminalizing behavior that ought to be a matter of personal choice, and by keeping such records public forever. Since I know that most Americans don't want the freedom that our founders guaranteed us, I won't get into how the various state legislatures could shrink the lawbooks to a controllable level. However, I would like to see a time limit on most criminal records so that they automatically drop off after a reasonably short time.

However, my real hope is that private employers simply pay attention to what they are doing and treat each individual as an individual, and not merely as a government record. George W. Bush has a DWI, and has admitted that he partied extensively in his youth. Whatever you might think of his presidency, no one has suggested that this criminal record affects his present performance.

I certainly agree that driving while under the influence is a personal choice. I also believe that the decision to drink and excess and put the general public in danger by getting behind a wheel is a reflection of judgment and character. Would I put an individual with multiple DUI’s behind the wheel of company vehicle? Absolutely not. What metrics do you use to determine good and bad decisions? And what metric should a hypothetical employer use to determine who should and shouldn’t drive a company vehicle?

I enjoyed your article "Focus on productivity, not flashy, make-work projects" printed in the Washington Post and reprinted locally in the Minnesota's Pioneer Press. You raise some very important points in regards to validating that a given project will create long term gainful employment after construction is completed. I would make one comment related to a statistic that you use in the article. Specifically, "80 percent of 800 manufacturing firms surveyed in 2005". This is clearly a dated statistic that may have marginal relevance to the current economic environment.

If it is truly the case the American businesses are struggling to find "blue-collar workers and technicians" they need to shout out from the roof tops. Having spent over 20 years in the construction trades I cannot think of a more appropriate time for business to make a concerted effort to match unemployed technicians with available jobs.

There is a simply and blunt reality that thousands of Americans will need to relocate to find these jobs. It is equally blunt that relocation will be exceptionally difficulty with home sales as depressed as they currently are.

In short anyone that purports to have an insight in where available jobs are has no standing in holding back that information. If you converse with businesses that are in short supply of workers, implore them to make this information readily available. Quite honestly I cannot think of a better time to develop an internet based regional and/or national databases of open positions posted free for businesses.

There will have to be some very creative solutions in regards to how prospective employees are matched with available positions. I say this as I read the local business section and I become less and less convinced that there is an overabundance of leadership in either the business or political communities.

In markets where unemployed homeowners cannot sell their properties, they are no doubt faced with some stark choices. I think some of these individuals might be inclined to rent the property if there was some assurance that a third party could effectively manage renters. While this may create a sense of unease the homeowner it has to be looked at as an option. In essence, an expanded market for property management companies may be a solution the relocations challenges faced in some regions of the country.

The surest way for an infrastructure program to be successful is simply to focus on fixing what we already have and know to be useful. I'm sure there are enough water/sewer, street, sidewalk, bridge, and dam repair projects in the country to absorb whatever money the federal government doles out. There's no need to spend that federal money on efforts to catalyze economic development through new infrastructure. When you try to do something new, there is high potential for failure and waste. Let states and localities use the federal money to repair what they would repair anyway if they only had the money. This will buy them the breathing room to spend their own money on more innovative projects. I think we are more likely to see successful innovation come from the state and local level, so let's set them free to innovate.

To achieve Joel Kotkin's admirable goal of concentrating on basics and rebuilding productivity, such an infrastructure bill should be managed from the top down by someone insulated from the usual pork-barrel spending that occurs around these bills.

Infrastructure is usually funded from the bottom up, because municipalities should know best what they need...right?

The problem is, if the infrastructure spending bill comes to pass as they usually pass, 99% of the money will be distributed to campaign contributors rather than meaningful projects. Needless projects will be built while needed projects are ignored.

In 1990 the US Government passed an Intramodal Surface Transportation Act (so-called "ISTEA") as an infrastructure bill. Very little of the money saw the light of day in terms of new projects.

Approximately a year after the ISTEA bill was passed, and money was supposed to be spent on transportation, an underground tunnel in Chicago collapsed due to disrepair, flooding a whole section of the city. The public works department evidently received massive amounts of money from the government for infrastructure, but refused to spend less than $1 million for a contractor to shore up the old brick tunnel.